How Big Of A Risk Are You?

YOU ARE A BIG RISK! As the shock in addition to the unsettling feeling of being judged give rise to such questions such as “ to whom or what am I such a big risk to and what makes me such a big risk?” These are perfectly legitimate questions that are asked by perfectly legitimate people. As the saying goes “inquiring minds want to know.” Unfortunately (or fortunately depending on your point of view) there are a myriad of circumstances that dictate what the answer will be.

Let’s start with three obvious scenarios that deal with your finance, credit history, etc. These scenarios include applying for a mortgage, insurance and credit cards. Each has their own industry standard method of determining how big of a risk you present versus the potential profit that can be made by accepting your application.

Scenario #1 – Mortgage Application: The bank or lender you have applied for a mortgage to will look at your FICO Score, overall credit history, plus your income and assets. If your credit profile reveals a “scratched and dented” history you are risk. Throw in a large loan request on top of an unstable employment history in conjunction with other factors will put you in the BIG RISK CATEGORY. Are you worth the risk? The final judgement (approval or denial of credit) will be determined by the infamous risk vs reward (profit potential) thought process. If the profit potential via higher rates, points, large down payment along with a nice yield spread premium is so great that it almost negates all risk factors then you have just won bingo aka being approved.

Scenario #2 – Insurance application: You have just applied for insurance on your house, car and your life. What criteria does an insurance carrier use to determine how much of a risk you are (or in the case of automobile insurance you may only qualify for the Assigned Risk Automobile Insurance Pool) of being a “claims person” (you have had the audacity to use this coverage that you have been paying premiums for)based on a C.L.U.E. Report (information about your claims history that is available for any insurer you apply for coverage with to see)or look at this way you have been watched. So you are a smoker, had other prior claims on your record makes you (as if you didn’t know) a Big Risk. Are you worth the risk? Here again the risk vs profit potential theory comes into play.

Scenario #3 – Credit Card Application: Master Card, Visa Card, Gas Card, and store card. Limited or poor credit history makes you a Big Risk. No risk vs. profit potential here as the above are all unsecured. In the event you fail to pay back the amount of credit you have used it is very difficult for the bank to collect their money from you. Therefore you will be denied many times over or forced to go the pre-paid Credit Card route. You are a big risk! [/message]

If you are a big credit risk for reasons mentioned above an employer may not want to hire you based on their sometimes illogical thinking that if you have poor credit chances are you will not perform well on the job. Should you have been presented to the employer through a recruiter you are a Big Risk as the fee they paid to the recruiter might not be refundable.

The list of people you could be considered a Big Risk to include a landlord, neighbor, boyfriend, girlfriend, spouse or your children. With a criminal record you may be considered a Big Risk to society. Suffer from depression or other serious mental illness you are a Big Risk for suicide or a threat to hurt others.

There was a lot of risk involved here. How Big Of A Risk Are You? You are the only entity that has no say in the whole process of risk determination. One last thing before I go which is KNOW YOUR RIGHTS! Incorrect determinations or decisions are not uncommon but you have to know how to fight to get the Big Risk tag removed from your name.